On Thursday, the Sterling was able to recoup some of its losses against the US dollar, but it was still close to a two and a half year low ahead of the speeches scheduled by officials of the Federal Reserve and Bank of England (BoE).
The speeches could help determine the outlook of the British currency in the near term.
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The Jackson Hole Symposium of the Kansas City Federal Reserve is scheduled to begin on Thursday.
It is a three-day event and will be attended by Jerome Powell, the chairman of the Federal Reserve, along with Andrew Bailey, the Governor of the Bank of England (BoE).
On Tuesday, the British pound dropped to its lowest level since March 2020, after purchasing managers’ index (PMI) indicated that private sector activity had slowed down in the month of August.
There was a 0.5% gain in the British currency by 0924 GMT as it reached $1.1844 after the US dollar rally took a breather.
Earlier in the week, the greenback had seen a run that had seen it hit a high of two decades. Market analysts said that the pound movement was nothing more than a technical reset.
They said that it could also be considered a relief as part of a weakening trend in the longer term. Some said that this could also be the US dollar backing down a bit.
Focus on speech
Investor focus has now shifted to the symposium in Jackson Hole where it is expected that the BoE’s governor will reiterate their commitment to hiking interest rates for battling inflation.
The central bank wants to bring inflation down to its target, even though it has already forecast an economic recession to happen at the end of the year and to continue till 2024.
Money markets have already priced in an interest rate hike of 50 basis points in the Bank of England’s meeting next month, but there is also a slight possibility of a 75 basis points increase.
The British pound was holding steady against the euro at 84.45 pence. This year, both the Sterling and the euro have recorded declines of about 12% against the US dollar so far.
This is because the euro zone is also dealing with problems similar to the British economy in terms of slowing growth and soaring gas prices.
The energy cost issue has driven European currencies to stay out of favor. There was an additional 5% increase on Thursday in front month Dutch gas.
This is considered a benchmark for Europe and it only added more pressure on the European economy, which needs to refuel its supplies for the winter season.
Russia’s Gazprom has already announced that it will shut down gas supplies to Europe at the end of August through the Nord Stream 1 pipeline for three days for unscheduled maintenance.
This has only added to worries about gas supplies in the continent, which are already quite limited because of the heatwave in the continent.
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